Does Bitcoin have an impact on the global economy?

When Satoshi Nakamoto created Bitcoin, the world was just recovering from one of the most detrimental financial crises of the 20th century. From 2007 to 2008, the effects of global subprime mortgages and toxic assets led to a monetary collapse in the US, which quickly expanded to the entire world.

Bitcoin was released in 2009, and for many, it represented “financial freedom” as no government or financial institution ruled over it. Still, a few years later, investors discovered that getting into Bitcoin comes with significant risk since the cryptocurrency is volatile. However, if you buy Bitcoin, the prices will keep surging from one year to another, becoming one of the most valuable assets on the crypto market.

Nowadays, Bitcoin has become so popular that El Salvador made it legal tender, while many other countries are accepting it as a reliable means of payment. Therefore, its value and significance for the regular investor expanded, so what’s its impact on the economy?

Bitcoin can promote financial inclusion

Numerous worldwide countries don’t provide access to banking services to many of their citizens, and there are various reasons for that. Unfortunately, the end consumer is the most affected, leaving people without internet connection, telephone services, and access to financial aid.

However, Bitcoin has the power to bring change across developing nations, where corruption is difficult to deal with. For example, an African startup developed a system through which people could use any type of phone with a SIM card to buy and sell Bitcoins, offering people the choice of creating a portfolio and investing in cryptocurrency.

Another example is El Salvador, the country that made Bitcoin legal tender. Although the project isn’t completely scaled to offer valuable insight, we can see that citizens can leverage their Bitcoins in local shops, as many started accepting the cryptocurrency after governmental approval. Considering the country’s significant inflation, Bitcoin may help people buy necessities and pay for various services despite the value of their fiat currency.

Bitcoins ensure exemption from the US dollar

Unfortunately, due to considerable financial challenges throughout the century, many countries had to rely on the US dollar so that the economy would not collapse completely. The Republic of El Salvador had long used the US dollar in addition to its fiat currency, but the country adopted Bitcoin to escape the need for it.

Zimbabwe, Panama, and Ecuador are in similar situations where the US dollar is a quasi-currency of exchange because their inflation was and still is significant. Venezuela, for example, was known for one of the highest inflations in recent years, at 230%, followed closely by Zimbabwe (190%) and Sudan (127%). These countries faced considerable inflation, whether due to geopolitical pressure or strong consumer demand, but the rising housing costs also influenced this economic factor to increase.

Still, leveraging Bitcoin to withstand inflation could be a viable solution for the future, as the cryptocurrency is less influenced by such elements and is instead based on investor sentiment and supply and demand.

Bitcoin lowers third-party dependence

While external parties helped companies thrive considerably in the age of the Internet, they’re starting to hinder the speed and efficiency of transactions and processes. Recently, most of the third parties companies employed for various benefits have hidden costs and provide limited options for the control of the supply chain.

Using cryptocurrency such as Bitcoin wouldn’t need the use of third parties, because transactions on the blockchain are automatically verified by worldwide nodes. The crypto network is designed in such a way that no official institution is required to step in for people to undergo them, while nodes, validators, and miners are all doing their part in the plan due to the incentivization system.

Hence, introducing Bitcoin in our traditional financial systems would make global transactions faster and cheaper, as there wouldn’t be any third-party involved in the process.

Bitcoin enhances the need for regulation

While Bitcoin is widely legal, with few exceptions where it’s banned, regulations have a long way to go because governments are still skeptical about its functionalities. Currently, different nations have developed a minimum of rules around cryptocurrencies, which includes taxing income and categorizing it as a financial asset.

However, users continue to leverage Bitcoin as it provides numerous benefits for one’s passive income, so governments are starting to prioritize it and include it in their election program. Therefore, in the future, we should expect institutions to focus on Bitcoin’s features and introduce them into companies’ systems to improve speed and efficiency.

Still, what if Bitcoin flops?

Despite investors’ optimistic view on the future of Bitcoin as a means of payment, we should prepare for the surprise of the end of cryptocurrency because there might be a possibility that users decide it’s not effective anymore. If there’s a massive spike in prices and it becomes obsolete, many people will give up on investing or mining because the costs of these activities have increased as well.

Depending on how the world changes, on the global conflicts and economic situation, Bitcoin might flop at some point because it’s still not well-established, and people are not using it freely and easily, which is considerably important for the end user. Having to pay with Bitcoin in the same way as we do with our bank accounts or taking advantage of prices should be accessible and straightforward, but much of the UX for these crypto coins is difficult to navigate and far from inviting.

There are many possibilities when it comes to Bitcoin, so it’s best to be prepared for each one because the volatility and instability of these assets can decide their future.

Is Bitcoin a strong cryptocurrency?

The link between Bitcoin and the worldwide economy is still challenging to perceive because its usage cannot be scaled at the moment. Still, investors and crypto users advocate for Bitcoin to be officially part of the world because the cryptocurrency has the power to promote financial inclusion, free countries from US dollar dependency, and navigate the changing regulation of financial assets.